New Hampshire Court: First Amendment Protects Criticism of “Patent Troll”

A New Hampshire state court has dismissed a defamation suit filed by a patent owner unhappy that it had been called a “patent troll.” The court ruled [PDF] that the phrase “patent troll” and other rhetorical characterizations are not the type of factual statements that can be the basis of a defamation claim. While this is a fairly routine application of defamation law and the First Amendment, it is an important reminder that patent assertion entities – or “trolls” – are not shielded from criticism. Regardless of your view about the patent system, this is a victory for freedom of expression.

The case began back in December 2016 when patent assertion entity Automated Transactions, LLC (“ATL”) and inventor David Barcelou filed a complaint [PDF] in New Hampshire Superior Court against 13 defendants, including banking associations, banks, law firms, lawyers, and a publisher. ATL and Barcelou claimed that all of the defendants criticized ATL’s litigation in a way that was defamatory. The court summarizes the claims as follows:

The statements the plaintiffs allege are defamatory may be separated into two categories. The first consists of instances in which a defendant referred to a plaintiff as a “patent troll.” The second is composed of characterizations of the plaintiffs’ conduct as a “shakedown,” “extortion,” or “blackmail.”

These statements were made in a variety of contexts. For example, ATL complained that the Credit Union National Association submitted testimony to the Senate Committee on the Judiciary [PDF] that referred to ATL as a “troll” and suggested that its business “might look like extortion.” The plaintiffs also complained about an article in Crain’s New York Business that referred to Barcelou as a “patent troll.” The complaint alleges that the article included a photo of a troll that “paints Mr. Barcelou in a disparaging light, and is defamatory.”

ATL had filed over 50 lawsuits against a variety of banks and credit unions claiming that their ATMs infringed ATL’s patents. ATL also sent many demand letters. Some in the banking industry complained that these suits and demands lacked merit. There was some support for this view. For example, in one case, the Federal Circuit ruled the several of ATL’s asserted patent claims were invalid and that the defendants did not infringe. The defendants did not infringe because the patents were all directed to ATMs connected to the Internet and it was “undisputed” that the defendants’ products “are not connected to the Internet and cannot be accessed over the Internet.”

Given the scale of ATL’s litigation, it is not surprising that it faced some criticism. Yet, the company responded to that criticism with a defamation suit. Fortunately, the court found the challenged statements to be protected opinion. Justice Brian T. Tucker explained:

[E]ach defendant used “patent troll” to characterize entities, including ATL, which engage in patent litigation tactics it viewed as abusive. And in each instance the defendant disclosed the facts that supported its description and made ATL, in the defendant's mind, a patent troll. As such, to the extent the defendants accused the plaintiffs of being a “patent troll,” it was an opinion and not actionable.

The court went on to explain that “patent troll” is a term without a precise meaning that “doesn’t enable the reader or hearer to know whether the label is true or false.” The court notes that the term could encompass a broad range of activity (which some might see as beneficial, while others see it as harmful).

The court also ruled that challenged statements such as “shakedown” and comparisons to “blackmail” were non-actionable “rhetorical hyperbole.” This is consistent with a longline of cases finding such language to be protected. Indeed, this is why John Oliver can call coal magnate Robert Murray a “geriatric Dr. Evil” and tell him to “eat shit.” As the ACLU has put it, you can’t sue people for being mean to you. Strongly expressed opinions, whether you find them childish or hilariously apt (or both), are part of living in a free society.

Justice Tucker’s ruling is a comprehensive victory for the defendants and free speech. ATL and Barcelou believe they are noble actors seeking to vindicate property rights. The defendants believed that ATL’s conduct made it an abusive patent troll. The First Amendment allows both opinions to be expressed.

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